The Agribusiness World Today

Ken Shwedel
Investigador de Agronegocios de Rabobank, México
21 - 28 de Enero de 2008

The World

What worry me? That may be WALMART´S public posture, but their actions suggest that they are indeed worried about the possible competitive pressure from Tesco in their home U.S. market. In the UK market Tesco has the number one position. While there are a number of reasons for Tesco’s strength, WALMART seems to have identified the small store concept as one of Tesco’s key success factors. They may even be still smarting from their failed attempt in the UK to compete with the Tesco’s Express outlets with their ASDA Essentials format. In the U.S. market they don’t want to let Tesco do what they did in the UK: “gain substantial market share through the small store route."

To this end WALMART is about to launch a new format; their first in ten years. The new format, which will be branded as Marketside, will be 20,000 square feet, which is about a tenth of the size of their supercenter format and even smaller than their 30,000 foot Neighborhood Market format. This small store format has the advantage of not running headlong into regulations in a number of cities requiring the same public consultations which are required before opening a supercenter. Nevertheless, analysts note that the Marketside outlets are designed to go head – to – head with Tesco’s Fresh & Easy format. For example, the logo which has “green lettering with a stylized tomato, egg and grape” is intended to send a message to consumers that the Marketside stores stress freshness. While the strategy seems solid, the real question is whether or not WALMART can effectively, i.e. competitively, operate a small store format. Don’t forget that there are only 128 Neighborhood Market stores.

Pods pushing coffee in the Netherlands: It is not all that usual for a market to turn around, yet that is what is happening in the Netherlands according to a report by Research and Markets. Of course there are a growing number of coffee shops and the “Dutch consumer is becoming more adventurous…as illustrated by the growing popularity of espresso, cappuccino, single origin coffee and flavored coffee.” But what really seems to be behind the turnaround is an innovation in preparation with the introduction of coffee pod machines by Philips and Sara Lee/DE. For the consumer the use of the coffee machines represents a “new way of making coffee [which is] suitable for smaller households, delivering good quality coffee and [is] faster than tradition filter coffee machines.” Not only are the Dutch consuming more coffee, but because the pods are more expensive than regular ground coffee, the value of the market has grown. While coffee is growing, tea consumption has taken a hit.

Mexico

Strong growth in supermarket segment, but…: According to data from ANTAD, supermarket sales in 2007 grew by 10.7 percent. This does seem to be a significant growth, but it largely reflects an increase in the number of stores. Floor space is estimated to have grown by more than 11 percent. Looking only at same store sales, they grew by just 1.7 percent. While increased competition and cannibalism does explain in part the poor same store performance, we feel that this reflects a slowdown in the economy and points to a difficult 2008.